Belgium’s growth to dip in ’24 – OECD

Belgium’s economy is set to experience a slowdown, with growth projected to dip to 1.3 per cent in 2024, from 1.5 per cent in 2023, before slightly improving to 1.4 per cent in 2025, said the Organisation for Economic Cooperation and Development‘s (OECD) updated Economic Outlook on Thursday.

This downturn is attributed to subdued global trade and high interest rates; however, a rebound in investment is expected in 2025 as external demand increases and inflation and financing conditions improve.

Inflation is projected to peak at 3.6 per cent in 2024 before falling to 1.9 per cent in 2025. The fiscal deficit is likely to expand in 2024, but a mild consolidation is anticipated in 2025 as the new government addresses the high debt burden and new EU fiscal rules are implemented.

The country’s GDP growth slowed to 0.4 per cent in the fourth quarter of 2023, with employment growth also slowing down. High borrowing costs and weak confidence are dampening domestic activity, with housing investment dropping by 2.7 per cent in Q4 2023.

Industrial production has been falling for 15 consecutive months since February.

Belgium’s exports dropped by 3.3 per cent in 2023 due to weak global trade. While retail energy prices have decreased, electricity tariffs are expected to increase by an average of 77 per cent from 2024 to 2027. Food prices are also rising faster than in neighbouring European countries, contributing to persistent inflation.

The country’s debt-to-GDP ratio is one of the highest in the EU due to the energy crisis, with most of the debt concentrated at the federal level. A coordinated, medium-term consolidation effort is needed to manage age-related costs and the climate transition.

Belgium needs to commit to a multi-year reduction in public debt and deficit as part of the new EU fiscal rules. Shifting taxation from labour to capital and increasing the participation of older workers in lifelong learning could enhance productivity.